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In re Funes

United States District Court, Central District of California

December 4, 2014

In re Elva Maricely Funes, Debtor,
Strategic Acquisitions, Inc.; and HSBC Bank USA, N.A., Appellees. Elva Maricely Funes, Appellant, Bankruptcy No. 1:13-bk-16987-MT



Before the Court is an appeal filed by Elva Maricely Funes ("Funes"). Funes challenges an order issued on July 3, 2014, denying her Motion to Reopen Chapter 13 Bankruptcy. Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court finds that this matter is appropriate for decision without oral argument.

I. Background

On April 11, 2007, Funes executed a deed of trust against her residence located in VanNuys, CA (the "Property"). (1 Excerpts of Record ("ER") 42. The beneficiary of the deed of trust was Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for Mortgageit, Inc. Appellee HSBC Bank USA, NA. ("HSBC") eventually purchased the loan. (1 ER 42-43.) Funes defaulted on the loan and, on January 6, 2010, foreclosure proceedings were initiated against the Property. (1 ER 64.) A notice of trustee's sale was recorded, setting a sale date of August 26, 2013. (1 ER 75.) This sale date was continued to November 1, 2013. On that date, appellee Strategic Acquisitions, Inc. ("Strategic") purchased the Property as the high bidder at the foreclosure sale. (1 ER 31, 35.)

Also on November 1, 2013, at 9:45 a.m., Funes filed for Chapter 13 bankruptcy. (1 ER 1.)[1] At that time, Funes was represented by Bruce A. Thomason of the Thomason Law Center. (1 ER 1.) Funes' voluntary petition was a facepage petition. The filing did not include the required schedules or statement of affairs. (1 ER 1-7.) Funes never filed her schedules and the Bankruptcy Court issued a notice to Funes that she had 14 days to properly file her schedules and other documents or her case would be dismissed. (1 ER 8-9.) Funes failed to comply and her bankruptcy case was dismissed on November 13, 2014. (1 ER 15.) The order of dismissal provided that the Bankruptcy Court retained jurisdiction over "all issues arising under Bankruptcy Code § 110, 329 and 362." (1 ER 15.)

On the same day the case was dismissed, Strategic filed a motion to retroactively annul the automatic stay to allow the foreclosure sale to be completed by execution and delivery of the Trustee's Deed Upon Sale ("TDUS"). (1 ER 16-88.) This motion was served on Funes by mail and on her counsel through the Bankruptcy Court's ECF system. (Id.) Strategic additionally served Funes and her counsel with a "Notice of Intent by Movant, Strategic Acquisitions, Inc. to Proceed with Motion to Annul Automatic Stay and for Relief from the Automatic Stay after Dismissal of Case." (1 ER 89-91.)

Neither Funes nor her counsel filed an opposition to Strategic's motion or appeared at the hearing on December 11, 2013. (1 ER 92.) The Bankruptcy Court granted the motion as requested, found that the filing of the bankruptcy petition was in bad faith, and annulled the stay in order to validate the sale to Strategic. (1 ER 92-96.) The order expressly stated that "Movant may enforce its remedies by completing the foreclosure sale of the Property." (1 ER 93.) The Bankruptcy Court served the order on both Funes and her counsel on December 20, 2013. (1 ER 96.) Funes never appealed this order or otherwise sought reconsideration or relief from the Bankruptcy Court. (1 ER 530.)

The Bankruptcy Court closed the case on January 8, 2014. (1 ER 97.) Eight days later, on January 16, 2014, Funes' current counsel, Simon Resnik Hayes LLP, filed an ex parte motion to reopen the bankruptcy case and to vacate the order annulling the automatic stay. (1 ER 98.) The Bankruptcy Court granted the motion to reopen the case on January 23, 2014, but denied the request to vacate the order annulling the stay. (1 ER 134-35.) Instead, the Bankruptcy Court concluded that Funes's effort to reimpose the stay was procedurally improper because a debtor seeking to reimpose a stay must ordinarily file an adversary proceeding seeking injunctive relief. (Id.) Funes did not appeal the denial of her application to reimpose the stay. (1 ER 531.)

On January 31, 2014, Strategic filed a lawsuit in Los Angeles Superior Court (the "State Case") seeking an order requiring HSBC to issue the TDUS to Strategic as a result of Strategic having been the winning bidder at the trustee's sale on November 1, 2013. (1 ER 273-75.) Funes, represented by her new counsel at Simon Resnik Hayes LLP, filed a crosscomplaint in the State Case against Strategic and HSBC. (Id.) As part of the State Case, Funes filed an ex parte application for a temporary restraining order to prevent HSBC from issuing the TDUS. (Id.) The Los Angeles Superior Court denied Funes' ex parte application for temporary restraining order on April 18, 2014. (Id.) Funes then filed an ex parte application for reconsideration of the denial of her request for a temporary restraining order. (Id.) The Los Angeles Superior Court denied the ex parte application for reconsideration on May 12, 2014. (Id.)

While the parties were litigating the State Case, Funes never filed the adversary proceeding that the Bankruptcy Court had indicated was the procedurally proper method for obtaining a reimposition of the bankruptcy stay. Nor did Funes or her counsel at Simon Resnik Hayes LLP file anything else in the reopened bankruptcy case, including filing the required bankruptcy schedules and statement of affairs that were not filed when Funes first filed the bankruptcy petition. (1 ER 531.) The Bankruptcy Court dismissed the reopened case on February 14, 2014, as a result of Funes' failure, for a second time, to file the required schedules. (ER 133.)

After not pursuing her reopened bankruptcy case, and having it dismissed for the second time, Funes filed a new Chapter 13 case (her third) on April 8, 2014, as case number 1:14-bk-l 1843-AA. On May 1, 2014, the Bankruptcy Court denied Funes' motion to impose an automatic stay because Funes was not eligible to file a second Chapter 13 petition in the same year and had not overcome the presumption of bad faith. (1 ER 289-90.) Strategic filed a motion to dismiss this new bankruptcy case on the grounds that Funes was ineligible to file bankruptcy under 11 U.S.C. § 109(g). Funes did not oppose the motion to dismiss and the Bankruptcy Court granted the motion and dismissed this third Chapter 13 case on June 5, 2014. (1 ER 292-93.)

Strategic and HSBC resolved the issues regarding the TDUS contained in Strategic's State Case against HSBC. As a result of that settlement, HSBC executed and delivered the TDUS to Strategic. Strategic recorded the TDUS on May 21, 2014. (1 ER 259-60.) Stretegic then dismissed its claims against HSBC in the State Case. (1 ER 273-75.)

After her third bankruptcy petition was dismissed on June 5, 2014, and her request for injunctive relief had been denied in the State Case, Funes filed, on June 17, 2014, a second motion to reopen in bankruptcy case number l:13-bk-16987-MT. (1 ER. 139-239.) In her motion to reopen, Funes stated her intention to commence an adversary proceeding to reimpose the bankruptcy stay, annul the Bankruptcy Court's December 20, 2013 order granting Strategic's motion for relief from the automatic stay based on an argument that Strategic lacked standing to seek relief from the stay, and pursue a claim against Strategic and HSBC for violating the automatic stay. (Id.) Strategic and HSBC filed oppositions to Funes' motion to reopen. (1 ER 244-322, 441-96, 497-505.) The Bankruptcy Court held a hearing on Funes' motion to reopen on June 25, 2014, during which it denied the motion on the record. (2 ER 1-22.) Among other reasons for denying Funes' motion, the Bankruptcy Court stated: "You have had so many bites at the apple, there's like a core left. It's ridiculous." (2 ER 17:6-7.) The Bankruptcy Court entered a written order denying the motion on July 3, 2014. (1 ER 497.) In its written order, the Bankruptcy Court concluded:

[Strategic] did have standing to file a motion to annul the automatic stay and that the Debtor did not oppose or appeal that order. Those findings, along with the Debtor's prior conduct and timing of this motion and the prior filing by the Debtor that were not prosecuted or acted upon with reasonable diligence, the Debtor's conscious decision to pursue her remedies in other Courts, the Debtor's forum shopping and the recordation of the trustee's deed upon sale when there was no automatic stay and other factors support denial of the motion.

(1 ER 507-08.) Funes filed a notice of appeal on July 9, 2014. (1 ER 509.) Strategic elected to have the appeal heard in this Court. (1 ER 522.)

II. Jurisdiction

This Court possesses jurisdiction to consider the denial of a motion to reopen a bankruptcy case. See In re Staffer, 306 F.3d 967, 971 (9th Cir. 2002) (holding that the Ninth Circuit possesses jurisdiction over an appeal of a denial of a motion to reopen a bankruptcy case pursuant to 28 U.S.C. § 158(d)). Although Funes identifies two issues on appeal, first, whether the Bankruptcy Court erred in denying the motion to reopen, and second, whether the Bankruptcy Court erred when it concluded that Strategic had standing to request retroactive annulment of the automatic stay, only Funes' appeal of the Bankruptcy Court's July 3, 2014 denial of the motion to reopen was timely and properly appealed. See Fed.R.Bankr.P. 8002(a) (requiring a notice of appeal to be filed within 14 days of the entry of the appealed order). Because Funes did not appeal the Bankruptcy Court's December 20, 2013 order granting of Strategic's motion for retroactive relief from the automatic stay, at all, let alone within 14 days of its entry, this Court lacks jurisdiction over any challenge to that order. See In re Mouradick, 13 F.3d 326, 327 (9th Cir. 1994) ("The provisions of Bankruptcy Rule 8002 are jurisdictional; the untimely filing of a notice of appeal deprives the appellate court of jurisdiction to review the bankruptcy court's order.").[2]

III. Standard of Review

The denial of a motion to reopen a bankruptcy case is reviewed for an abuse of discretion. In re Staffer, 306 F.3d at 971. Under an abuse of discretion standard, this Court must affirm the Bankruptcy Court's decision unless the Bankruptcy Court "applied the wrong legal standard or its findings were illogical, implausible or without support in the record. See, Inv. v. eDriver, Inc., 653 F.3d 820, 832 (9th Cir. 2011). The Bankruptcy Court's decision may be affirmed on any ground finding support in the record. Elliott v. Four Seasons Properties (In re Frontier Properties, Inc.), 979 F.2d 135, 1364 (9th Cir. 1992).

IV. Discussion

A bankruptcy case "may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b). "[Rjeopening of a closed bankruptcy case is a ministerial act that functions primarily to enable the file to be managed by the clerk as an active matter and that, by itself, lacks independent legal significance and determines nothing with respect to the merits of the case." In re Menk, 241 B.R 896, 912 (B.A.P. 9th Cir. 1999). A motion to reopen "legitimately presents only a narrow range of issues: whether further administration appears to be warranted; whether a trustee should be appointed; and whether the circumstances of reopening necessitate payment of another filing fee." Id. at 916-17.

A party's lack of diligence may justify the denial of a motion to reopen. See Redmond v. Fifth Third Bank, 624 F.3d 793, 799 (7th Cir. 2010) ("The longer a party waits to file a motion to reopen a closed bankruptcy case, the more compelling the reason to reopen must be. In assessing whether a motion is timely, courts may consider the lack of diligence of the party seeking to reopen and the prejudice to the nonmoving party caused by the delay."). Nevertheless, the Bankruptcy Court "has the duty to reopen an estate whenever prima facie proof is made that it has not been fully administered." In re Herzig, 96 B.R. 264, 266 (B.A.P. 9th Cir. 1989). "In order for the denial of a motion to reopen to constitute an abuse of discretion, assets of such probability, administrability and substance must appear to exist as to make it unreasonable under all the circumstances for the court not to deal with them. Where the chance of any substantial recovery for creditors appears too remote to make the effort worth the risk, a trial court does not abuse its discretion in denying a motion to reopen." Id (quotation marks and citations omitted). "[T]he decision whether to reopen should not become a battleground for litigation of the underlying merits. Neither the action nor its possible value should be litigated in order to decide whether to reopen the bankruptcy case." In re Lopez, 283 B.R. 22, 28 (B.A.P. 9th Cir. 2002).

Here, Funes does not contend that reopening the case would benefit her creditors. Instead, Funes' motion to reopen was merely the latest procedural machination designed to seek relief from the foreclosure that has already occurred. These procedural maneuvers, which have included at least three bankruptcy petitions, a prior motion to reopen, and the pursuit of claims in the State Case cannot continue indefinitely. This is particularly true given that Funes and her counsel have repeatedly failed to pursue the remedies available to them or to file the required schedules and pursue her bankruptcy remedies in good faith. Specifically, Funes never filed the required schedules in bankruptcy case number 1:13-bk-16987-MT, despite having been warned and having the case reopened once for that purpose. Nor did she commence the adversary proceeding that the Bankruptcy Court had advised her was the procedurally-appropriate vehicle for her to seek the relief she requested. Instead, she pursued relief in the State Case until suffering adverse rulings. Only after she failed to get relief in the State Case did Funes seek, for a second time, to reopen this bankruptcy case.

Funes and her counsel have never acted with the diligence necessary to justify this second motion to reopen. The tactical decisions made by Funes and her counsel, and their failures to proceed diligently, have consequences. Under these circumstances, the Bankruptcy Court's conclusion that Funes was not entitled to yet another bite at the apple was not an abuse of discretion.

IV. Conclusion

For all of the foregoing reasons, the Court affirms the Bankruptcy Court's order denying Funes' motion to reopen.


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